As Germany’s Energiewende proceeds, it faces new challenges that the new grand coalition will have to deal with. Paul Hockenos takes a look at the next steps for Germany’s clean energy shift.

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Germany’s Energiewende is no longer in swaddling clothes. It’s now 13 years since the Renewable Energy Sources Act (EEG) was passed, which lay the groundwork for Germany’s power supply to jump from just 6% of renewably generated power to 25% today. The key to this unexpectedly rapid expansion was the 2000-passed feed-in tariff (FiT); its incentivized rates over 20 years gave investors across Germany the confidence to invest in clean energy technology – which many did. Thus the Energiewende was born, the clean energy transition that is being watched, with both skepticism and admiration, around the world.

Today, though – in large part because of the original FiT – Germany faces a set of issues very different than those of a decade ago. The questions now are: What reforms can make the further expansion of renewables affordable? How must regulation change to meet the new goals above and beyond 25% of renewable electricity? How will Germany cope as more nuclear reactors come off line? How will the country distribute ever more electricity generated by decentralized, small-scale producers? And, finally, how to cut back on carbon emissions, the Achilles Heel of the Energiewende?

Even staunch proponents of the Energiewende admit that it is desperately in need of a new framework for the decades ahead. It’s not a question of whether there should be reform – but rather how and how fast the Energiewende should proceed.

Indeed, this is the dilemma facing Germany’s next administration. The new partners, the Christian Democrats (CDU) and the Social Democrats (SPD), appear to agree that the Energiewende is moving in the right general direction, but that it requires significant tinkering around the edges. This comes as somewhat of a surprise as many observers reckoned that the energy transition was in for a far-reaching overhaul. But environment minister Peter Altmaier, who was in charge of the CDU’s energy portfolio in the coalition talks, says he doesn’t want to scrap it, but rather make the Energiewende “more planned, predictable, and affordable in the long-term.”

Goals: There are a number of scenarios for launching Germany toward a future based solely on low or zero-carbon technologies. Some are more ambitious than others. The previous government felt that 80% clean energy was feasible by 2050, for example, while the Greens think the country could be all-renewable by 2030. One thing everybody agrees on is that nuclear power in Germany will be phased out by 2022.

The targets that the previous government devised in 2010 (and then updated after Fukushima in 2011) are those that have generally been used until now. According to the so-called Energy Concept: climate-damaging greenhouse gas emissions are to be reduced by 40% by 2020. Compared to 2008, heat demand in buildings is to be reduced by 20% by 2020, while primary energy demand is to fall by 80% by 2050. Renewable energies are to achieve an 18% share of gross final energy consumption by 2020, a 30% share by 2030, 45% by 2040 and 60% by 2050. The Energy Concept envisages a 10% reduction in electricity consumption by 2020. By 2020 renewables are to have a share of at least 35% in gross electricity consumption, a 50% share by 2030, 65% by 2040 and 80% by 2050.

The two parties’ negotiators, Altmaier (CDU) and Hannelore Kraft (SPD), said that the 2020 goal of 10GW of offshore, wind-power capacity will be lowered to 6.5GW by 2020. (This is more a move adjusting to reality, since offshore expansion is significantly delayed, than really lowering targets.) As for onshore wind, it too will face cut backs, a move that would stifle the plans of southern Germans to expand wind energy. The tariff for PV will to continue to decline at the currently foreseen rate until it reaches 52MW, which should take another three years.

Renewable Energy Support: The FiT may have catapulted Germany to the front of the world’s clean-energy leaders, but the time has come to retool – or trash it.
The coalition isn’t scrapping the FiT right away, which one might have assumed from the tenor of the election campaign earlier this year. Rather they’re tweaking the existing framework, for the time being. This means lowering incentives for some renewable technologies, like bioenergy and wind.

Also, renewable plant operators will no longer be compensated when oversupply forces them to halt production. Moreover, new larger renewable power plants will have to sell their output directly on the exchange rather than to the transmission grid operators (TSOs). There will be a transition phase for wind power stations of up to 5MW installed capacity, but by 2018 they too must compete on the market. And, finally, the new government will scrutinize the 2,000-odd German companies exempt from FiT-related charges in an effort to relieve consumers of some of the burden.

One of the ways that Germany could eventually go is the direction of a market premium model, an option supported by Germany’s biggest industrial lobby group. RE producers in Germany already have this option, namely selling their product directly on the energy market and receiving a premium to top it off if the market price is low. But making this the rule rather than just an option would mean consigning the FiT to history. The premium model introduces more market competition into the process, which was the reason it was introduced in the first place.

Another option envisions a fundamental overhaul of the EEG to the benefit of solar PV and onshore wind. The Berlin-based think tank Agora Energiewende proposes to limit future feed-in tariffs for renewable power to 8.9 cents per kilowatt-hour. The surcharge for costly technologies that haven’t panned out so far, like geothermal, biomass, and offshore wind, would be cut back dramatically.

“This new model would limit the surcharge to the level needed by onshore wind and PV solar since they are the most cost effective. This wouldn’t prohibit other renewables from receiving a bump up, but there’s no reason to pay more than we need to get our energy system clean,” explains Patrick Graichen, Senior Associate at Agora Energiewende. “And there’d be no cap on renewables in terms of overall volume. It’s a radically simplified version of the EEG that would both promote the expansion of renewables and keep costs down.”

Transmission Grid: Germany’s grid for the future is a work in progress. The 2009-2013 government had been playing catch-up with the grid since the chancellor’s decision in the wake of the Fukushima disaster in 2011 to shut down eight of Germany’s 17 nuclear plants.

New legislation and decisions by the Federal Network Authority (FNA) prioritized and accelerated the construction and updating of grid connections across the country. The FNA recommended the construction of three new corridors and 2,800 kilometers of new transmission lines.

The incoming government’s commitment to reduce projections for offshore wind should have an impact on grid plans. “One or maybe even two of the corridors are redundant, at least for the time being, if offshore is being scaled by to 6.5GW,” says Peter Ahmels of the German Environmental Aid (DUH). The DUH advocates a low-cost, decentralized smart grid with fewer large corridors suited for a supply of dispersed renewables. Germany’s major grid operators tend to favor large transmission highways necessary based on a projection of more coal-fired. On another front, local activists and many municipal utilities are urging municipal or citizen ownership of regional transmission networks, which they believe will bring down costs and promote the growth of renewables in their localities.

The Coal Question: Germany’s continued reliance on coal and its high carbon emissions is arguably the most vulnerable aspect of the Energiewende. The previous government refused to scrap subsidies for the coal industry and failed to help put the EU ETS, the bloc’s cap-and-trade system for carbon dioxide emissions, back on its feet. Both the CDU and SPD say they want to make this right again by “backloading” emissions certificates, namely withholding allowances in order to push their price up. Coal subsidies are scheduled to end in 2015.

Should the EU ETS not be injected with more clout – or not enough – one proposal is to launch a more rigorous intervention on the national level. This would entail new regulations to reduce the share of coal based on explicitly limiting production quantities rather than address price.

Capacity Markets: The providing of back-up capacity for times when the sun doesn’t shine and the wind doesn’t blow grows larger the more renewably generated energy there is in the system. At the moment, flexible, modern gas-fired plants, Germany’s reserve of choice, aren’t profitable to run, much less build new. This issue, ultimately supply security, will be top on the new government’s agenda. For now, there are a host of options under discussion.

One promising option is the “focused capacity market.” This design consists of two segments, which will have separate auctions. The first, the older incumbent power plants, compete for capacity payments of one or four years. The second, namely new, high-flexibility power plants, would compete for capacity payments of over 15 years. “The capacity payments of different duration increase planning security for investors and plant operators while decreasing risk premiums and thus the costs for electricity consumers,” according to the Institute of Applied Ecology (Öko-Institut).

This is just one proposal among many. Another alternative is a “strategic reserve” where gas plants which would directly compensate otherwise unprofitable gas works to remain in operation for times of low renewable capacity.

One thing is certain: Germany does not intend to rest on its laurels content with the current status quo. There is an all-party consensus that the Energiewende will continue.